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Asset Disposition and Investment Recovery Trends for the Next 10 Years

This article was inspired by a recent article in Supply Chain Management Review magazine (SCMR.com), exploring what trends will affect the next generation of supply chains. We thought it would be interesting to review some of those trends identified, and see what the implications of those larger trends in the supply chain universe might mean for those of us living on Planet IR.

By understanding, anticipating, and acting upon these trends, companies can enhance the value of their supply chain operations, and—more importantly for our readers—investment recovery practitioners can increase the visibility of IR within their own organizations.

Recently, I happened to be perusing the aisle of a bookstore (there are still a few of them left) and found a book by Pavan Sukhdev titled Corporation 2020. The title was intriguing and the contents were illuminating. Basically, the author argued for a new formula for business success going forward—one that looked at all aspects of doing business and emphasized the corporation’s responsibility to society and to sustainability.

The forward-looking nature of Sukhdev’s book set the wheels in motion for this article. Quite a bit has been written over the years about the future of supply chains. MIT’s SCM 2020 project, for example, brought together leading thinkers and practitioners to address the subject.

THE TOP TRENDS IN SCM AND THEIR IMPACT ON IRBetter reporting of supply chain impacts. In Corporation 2020, Sukhdev writes in depth about the impacts of an organization’s manufacturing and business processes on other segments of society—and the need to disclose those externalities. While some work has been done around supply chain sustainability and the need to reduce carbon footprint, companies will need to do a much better job of disclosing the end-to-end impacts of their supply chains. This means measuring and reporting on the effect of major supply chain transactions on jobs created, carbon footprint reduction, sustainable procurement processes, types of labor used, and modes of transportation, among others. The customer will begin to demand transparency into these impacts in much the same way as the labeling of food products.

Implications for the IR Professional: As practitioners of a business process that increases sustainability, future investment recovery managers should deserve an even greater seat at an organization’s supply chain planning table. The cost avoidance of redeployment of an asset reduces the carbon footprint more than any manufacturing or procurement process improvements. IR practitioners have sustainability as an instinctive ability, because that’s what we do all day every day. Investment recovery activities should be a significant chapter in every major organization’s annual sustainability report. The sustainability movement is here to stay, and it will have a positive impact on the visibility of professional surplus asset management.

Knowledge work and workers will become global in nature. Knowledge work in supply chains today accounts for approximately 40 percent of the total labor hours spent. Much of this work deals with complex analytics, planning, procurement processing, and provision of services. The nature of the work, the need for multi-language support, and the associated local complexities of the different geographies being served will necessitate the seamless globalization of supply chain knowledge work. In short, knowledge workers will be able to manage elements of the supply chain from anywhere.

Implications for the IR Professional: As the world shrinks, the opportunities and challenges of surplus disposition grow. Markets for North American–based surplus will continue to expand beyond our borders, particularly as the manufacturing base expands overseas. IR managers will have to become more and more familiar with the differences and biases of other business cultures. Additionally, as other markets become more sophisticated in their manufacturing and employee benefits packages, it’s not inconceivable that processing equipment thought to be out of date for the Far East could find a home back here in the U.S. In short, investment recovery will continue to become more and more global. Toward that end, the 80th Investment Recovery Seminar in Scottsdale will offer an valuable session on “Best Practices in Global Background Screening.”

SCM will have a standard certification process similar to that for CPAs. Many universities offer undergraduate and graduate degrees in supply chain management. In addition, professional associations such as APICS, CSCMP, and ISM offer a range of certification programs. However, in most cases these programs focus either on the basics of SCM or on a specific activity such as import/export or financial analysis. We believe that a fundamental shift will occur in the normalized delivery, content served, and certifications of supply chain professionals.

Many other professions, like accounting (Certified Public Accountant) and engineering (Professional Engineers), require national board examinations as well as continuing professional education (measured by a specified number of hours per year). We contend that a similar professional credentials program will be required for supply chain professionals to normalize the knowledge base of the incoming resources.

Implications for the IR Professional: Our profession already offers a rigorous certification program through our association’s Education Committee: the Certified Manager of Investment Recovery. Historically, investment recovery has had little visibility within supply chain education curriculums, but that is changing with outreach specifically to Arizona State University and Rutgers and the publication of the Investment Recovery Handbook, Adding Value to the Supply Chain. The association has as one of its strategic initiatives to continue to grow this outreach and improve the overall value of the CMIR designation. Product clockspeeds will determine the number and nature of the supply chains. A global consumer durables company recently had over 70 percent of its products with a life span of less than 18 months. Another 20 percent had a life span of three to four years, and just 10 percent exceeded five years. This “fast clockspeed” life cycle is becoming more the norm than the exception, particularly with technology products. The winners of the future will have the same number of distinct supply chains as there are product clockspeeds. In addition, supply chain organizations will need to be aligned by product segments as well as functional segments in a matrix fashion to serve the distinct supply chain needs.

Implications for the IR Professional: Clearly, IT assets will continue to have short life cycles, requiring virtually every member company to develop a proactive program for management of this continual supply of surplus assets (which likely still have significant value in secondary markets). But computers, tablets, and smartphones are certainly not the only products that will have quicker “clockspeeds.” Even the most mundane piece of equipment likely has a significant technology component built in, providing a quicker turnaround in the life cycle, adding more and more surplus into the “in-bin” of the IR department. The same security issues that exist with an IT asset are present in the memory of a piece of process equipment—perhaps even more so.

Technology to support SCM will primarily be “on tap.” SaaS (software as a service) is gaining mainstream attention. We contend that most if not all supply chain technologies by 2020 will be delivered and consumed via this method—or “on tap.” The user will pay for the ability to use the capability and will not have to incur the large fixed costs of ongoing maintenance, upgrades, and infrastructure expenditures that can amount to almost 25–30 percent of the cost of ownership. The widespread adoption of SaaS constructs will likely be accelerated by the rise of cloud computing and diminishing concerns about the security aspects of SaaS.

Leaders will leverage social media in a closed-loop feedback process. Social media data is everywhere today. Recent research for a durable goods company showed that 2,000 websites or blogs were discussing the company’s products and service needs on a fairly regular basis. However, this company—like most—did not have a systematic method to study the data and disseminate the information to its various supply chain constituencies (design, planning, procurement, service, manufacturing, and so forth). This is necessary to provide closed-loop feedback processes that allow a company to proactively respond to feedback. The winning companies will be able to receive, process, and act on the data that is being provided to them by their constituents via social media.

Implications for the IR Professional: Social media is much more than your goofy cousin posting embarrassing photos of after-work activities. The Investment Recovery Association’s LinkedIn site has been growing by 50 percent a year. Millennials will only continue to accelerate the trend toward demanding instant access to information. Transparency of and communication about your available surplus is a natural for social media, and will only continue to grow. Ten years ago, the fax machine was one of the primary business communication tools of IR operations. Ten years from now, the fax machine will likely be part of IR departments’ surplus and idle assets needing to be scrapped.

Outsourcing and offshoring will continue apace. Although not specifically mentioned in the SCMR article, as corporations and governments at all levels continue to lean-out their processes, full-time staff positions will come under increasing scrutiny. The economic downturn and agonizingly slow recovery have become the new normal for business. The certainty of increased healthcare costs for full-time employees leads companies to try and avoid hiring whenever possible.

Implications for the IR Professional: The investment recovery function is a capability within an organization—one that from a distance can seem to be done capably by an outside service provider. Whether that is true or not, recent retirements of long-time IR professionals who are not being replaced by their companies are an indication that this trend may be on the rise. To use a sports metaphor, the need to continue to report your successes up the ladder is no longer just a good defensive strategy—increasingly, visibility of the value of IR in your organization is an all-important offensive requirement.

Conclusion. Staying still is not an option for supply chain practitioners, and should not be for IR practitioners either. Having the ability to create incremental value is fine, but real progress comes from anticipating and capitalizing on the kinds of trends we have discussed here. So what trends do you see in your future? What are the most powerful drivers for change in our profession? Change can be energizing, and those who have a finger to the wind will have an advantage in their careers. One has to start somewhere; enjoy the journey!

Source: Sumantra Sengupta, managing director with the business and operations strategy firm EVM Partners LLC. Portions of this article first appeared in Supply Chain Management Review magazine, July/August 2013.